Capital markets union: Council adopts new rules on alternative investment fund managers and plain-vanilla EU investment funds

Today, the Council adopted new rules to improve European capital markets and strengthen investor protection in the EU. The directive adopted today amends the alternative investment fund managers directive, which governs managers of hedge funds, private equity funds, private debt funds, real estate funds and other alternative investment funds in the EU.

The directive also modernises the framework for undertakings for collective investment in transferable securities (UCITS), i.e. plain-vanilla EU-harmonised retail investment funds such as unit trusts and investment companies.

The new rules enhance the integration of asset management markets in Europe and modernise the framework for key regulatory aspects.

They improve the availability of liquidity management tools, with new requirements for managers to provide for the activation of these instruments. This will help ensure that fund managers are well equipped to deal with significant outflows in times of financial turbulence.

The amending directive also covers an EU framework for loan-originating funds, i.e. funds that provide credit to companies, supplemented with several requirements to alleviate risks to financial stability and to ensure an appropriate level of investor protection.

The directive introduces enhanced rules for delegation by investment managers to third parties. This will enable them to better tap the best resources from market specialists, subject to reinforced supervision and preserving market integrity.

Other key components of the new rules include improved data sharing and cooperation between authorities, and new measures to identify undue costs that could be charged to funds, and hence their investors, as well as on preventing possible misleading names to better protect investors.

Next steps

The directive will now be published in the EU’s official Journal and enter into force 20 days later. Member states will have 24 months after the entry into force to transpose the rules into national legislation.

Background

The amendments to the alternative investment fund managers directive (AIFMD) and plain-vanilla EU investment funds (UCITS, or undertakings for collective investment in transferable securities) are part of the capital markets union (CMU) package which the Commission presented on 25 November 2021.

The capital markets union is the EU’s initiative to create a truly single market for capital across the EU. It aims to get investment and savings flowing across all member states for the benefit of citizens, businesses, and investors.